The Middle East after the Ottoman Empire

The Monarchies of the Middle East

Saudi Arabia

Saudi Arabia, an absolute monarchy organized around Sunni Islam and home to the second largest oil reserves in the world, has enjoyed friendly relations with the West, especially the United States.

Learning Objectives

Review the history of the Saudi royal family and how they have stayed in power

Key Takeaways

Key Points

Saudi Arabia, which was unified from four regions in 1932 by its first king, Ibn Saud, was once one of the poorest nations in the world, but quickly became one of the wealthiest in the Arab world after the discovery of massive oil reserves in 1938.

Since then, its stated foreign policy objectives are to maintain its security and its paramount position on the Arabian Peninsula, and as the world’s largest exporter of oil, to maintain cooperative relations with other oil-producing and major oil-consuming countries.

Consequently, it has enjoyed good relations with the West, especially the United States, as a strategic energy and security ally.

Saudi Arabia is an absolute hereditary monarchy, governed by a king, and the royal family dominates the political system.

The royal family’s vast numbers allow it to control most of the kingdom’s important posts and be involved and present at all levels of government.

The ultraconservative Wahhabi religious movement within Sunni Islam has been called “the predominant feature of Saudi culture,” with its global spread largely financed by the oil and gas trade.

Key Terms

Sunni Islam: The largest denomination of Islam. Its name comes from the word Sunnah, referring to the exemplary behavior of the Islamic prophet Muhammad. The differences between this sect and Shia Muslims arose from a disagreement over the choice of Muhammad’s successor and subsequently acquired broader political significance, as well as theological and juridical dimensions.

absolute monarchy: A form of monarchy in which one ruler has supreme authority that is not restricted by any written laws, legislature, or customs. These are often, but not always, hereditary monarchies. In contrast, in constitutional monarchies, the head of state’s authority derives from and is legally bounded or restricted by a constitution or legislature.

Saudi Arabia, officially known as the Kingdom of Saudi Arabia, is an Arab state in Western Asia constituting the bulk of the Arabian Peninsula. The area of modern-day Saudi Arabia formerly consisted of four distinct regions: Hejaz, Najd, and parts of Eastern Arabia (Al-Ahsa), and Southern Arabia (‘Asir). The Kingdom of Saudi Arabia was founded in 1932 by Ibn Saud. He united the four regions into a single state through a series of conquests beginning in 1902 with the capture of Riyadh, the ancestral home of his family, the House of Saud. Saudi Arabia has since been an absolute monarchy, effectively a hereditary dictatorship governed along Islamic lines. The ultraconservative Wahhabi religious movement within Sunni Islam has been called “the predominant feature of Saudi culture,” with its global spread largely financed by the oil and gas trade. Saudi Arabia is sometimes called “the Land of the Two Holy Mosques” in reference to Al-Masjid al-Haram (in Mecca) and Al-Masjid an-Nabawi (in Medina), the two holiest places in Islam.

The new kingdom was one of the poorest countries in the world, reliant on limited agriculture and pilgrimage revenues. In 1938, vast reserves of oil were discovered in the Al-Ahsa region along the coast of the Persian Gulf, and full-scale development of the oil fields began in 1941 under the U.S.-controlled Aramco (Arabian American Oil Company). Oil provided Saudi Arabia with economic prosperity and substantial political leverage internationally. Saudi Arabia has since become the world’s largest oil producer and exporter, controlling the world’s second largest oil reserves and the sixth largest gas reserves. The kingdom is categorized as a World Bank high-income economy with a high Human Development Index, and is the only Arab country to be part of the G-20 major economies. However, the economy of Saudi Arabia is the least diversified in the Gulf Cooperation Council, lacking any significant service or production sector (apart from the extraction of resources). The country has attracted criticism for its restrictions on women’s rights and usage of capital punishment.

Oil in Saudi Arabia: Dammam No. 7, the first commercial oil well in Saudi Arabia, struck oil on March 4, 1938. Saudi Arabia has since become the world’s largest oil producer and exporter, controlling the world’s second largest oil reserves, and the sixth largest gas reserves.

Politics: Absolute Monarchy

Saudi Arabia is an absolute monarchy. However, according to the Basic Law of Saudi Arabia adopted by royal decree in 1992, the king must comply with Sharia (Islamic law) and the Quran, while the Quran and the Sunnah (the traditions of Muhammad) are declared to be the country’s constitution. No political parties or national elections are permitted. Critics regard it as a totalitarian dictatorship.

In the absence of national elections and political parties, politics in Saudi Arabia takes place in two distinct arenas: within the royal family, the Al Saud, and between the royal family and the rest of Saudi society. Outside of the Al-Saud, participation in the political process is limited to a relatively small segment of the population and takes the form of the royal family consulting with the ulema, tribal sheikhs, and members of important commercial families on major decisions. This process is not reported by the Saudi media.

The king combines legislative, executive, and judicial functions and royal decrees form the basis of the country’s legislation. The king is also the prime minister and presides over the Council of Ministers (Majlis al-Wuzarāʾ), which comprises the first and second deputy prime ministers and other ministers.

The royal family dominates the political system. The family’s vast numbers allow it to control most of the kingdom’s important posts and be involved and present at all levels of government. The number of princes is estimated to be at least 7,000, with most power and influence being wielded by the 200 or so male descendants of Ibn Saud. The key ministries are generally reserved for the royal family, as are the thirteen regional governorships. The royal family is politically divided by factions based on clan loyalties, personal ambitions, and ideological differences.

Abdul Aziz Ibn Saud, the first king of Saudi Arabia, ruled for 21 years. In 1953, Saud of Saudi Arabia succeeded as the king of Saudi Arabia upon his father’s death, until 1964 when he was deposed in favor of his half brother Faisal of Saudi Arabia, after an intense rivalry, fueled by doubts in the royal family over Saud’s competence. In 1975, Faisal was assassinated by his nephew, Prince Faisal bin Musaid, and was succeeded by his half-brother King Khalid. King Khalid died of a heart attack in June 1982. He was succeeded by his brother, King Fahd, who added the title “Custodian of the Two Holy Mosques” to his name in 1986 in response to considerable fundamentalist pressure to avoid use of “majesty” in association with anything except God.

Fahd continued to develop close relations with the United States and increased the purchase of American and British military equipment. In response to civil unrest, a number of limited “reforms” were initiated by King Fahd. In March 1992, he introduced the “Basic Law”, which emphasized the duties and responsibilities of a ruler. In December 1993, the Consultative Council was inaugurated. It is composed of a chairman and 60 members—all chosen by the King to respond to dissent while making as few actual changes in the status quo as possible.

In 2005, King Fahd died and was succeeded by Abdullah, who continued the policy of minimum reform and clamping down on protests. The king introduced a number of economic reforms aimed at reducing the country’s reliance on oil revenue: limited deregulation, encouragement of foreign investment, and privatization. In 2015, Abdullah was succeeded as king by his half-brother Salman.

Foreign Relations

Saudi Arabia is a non-aligned state whose stated foreign policy objectives are to maintain its security and paramount position on the Arabian Peninsula, and as the world’s largest exporter of oil, to maintain cooperative relations with other oil-producing and major oil-consuming countries.

Saudi Arabian stated policy is focused on cooperation with the oil-exporting Gulf States, the unity of the Arab world, Islamic strength and solidarity, and support for the United Nations. In practice, the main concerns in recent years have been relations with the United States, the Israeli-Palestinian conflict, Iraq, the perceived threat from the Islamic Republic of Iran, the effect of oil pricing, and using its oil wealth to increase the influence of Islam and especially the conservative school of Islam supported by the country’s rulers.

United States recognized the government of King Ibn Saud in 1931. In the 1930s, oil exploration by Standard Oil commenced. There was no U.S. ambassador resident in Saudi Arabia until 1943, but as World War II progressed, the United States began to believe that Saudi oil was of strategic importance.

In 1951, under a mutual defense agreement, the U.S. established a permanent U.S. Military Training Mission in the kingdom and agreed to provide training support in the use of weapons and other security-related services to the Saudi armed forces. This agreement formed the basis of a longstanding security relationship. The United States is one of Saudi Arabia’s largest trading partners and closest allies, with full diplomatic relations since 1933 that remain strong today. However, Saudi Arabia’s relationship with the United States has been put under pressure since late 2013 after the United States backed from its intervention in the Syrian Civil War and thawed relations with Iran.

Jordan

Jordan is a constitutional monarchy known as one of the safest and most hospitable countries in the region, accepting refugees from almost all surrounding conflicts as early as 1948, with an estimated 2.1 million Palestinians and 1.4 million Syrian refugees residing in there.

Learning Objectives

Describe the Jordanian monarchy and some characteristics of the regime

Key Takeaways

Key Points

Jordan is an Arab kingdom in the Middle East, strategically located at the crossroads of Asia, Africa, and Europe.

Jordan is a constitutional monarchy, with a king (currently Abdullah II) and a prime minister.

The king appoints and may dismiss all judges by decree, approves amendments to the constitution after passing by both parliaments, declares war, and acts as the supreme leader of the armed forces; the king may also dissolve parliament and dismiss the government at his discretion.

Jordan is considered to be among the safest of Arab countries in the Middle East and has avoided long-term terrorism and instability.

In the midst of surrounding turmoil, Jordan has been greatly hospitable, accepting refugees from almost all surrounding conflicts as early as 1948, with 2.1 million Palestinians and 1.4 million Syrian refugees residing in the country.

Jordan is a key ally of the United States and UK, and together with Egypt is one of only two Arab nations to have signed peace treaties with Israel, Jordan’s direct neighbor.

Key Terms

constitutional monarchy: A form of monarchy in which the sovereign exercises authority in accordance with a written or unwritten constitution. It differs from absolute monarchy (in which a monarch holds absolute power), in that the monarchs are bound to exercise their powers and authorities within the limits prescribed by an established legal framework.

Gulf War: A war waged by coalition forces from 34 nations led by the United States against Iraq in response to Iraq’s invasion and annexation of Kuwait.

Organisation of Islamic Cooperation: An international organization founded in 1969 consisting of 57 member states, with a collective population of over 1.6 billion as of 2008. The organization states that it is “the collective voice of the Muslim world” and works to “safeguard and protect the interests of the Muslim world in the spirit of promoting international peace and harmony.”

Jordan, officially The Hashemite Kingdom of Jordan, is an Arab kingdom in Western Asia on the East Bank of the Jordan River. Jordan is bordered by Saudi Arabia to the east and south, Iraq to the northeast, Syria to the north, Israel, Palestine, and the Dead Sea to the west and the Red Sea to its extreme southwest. Jordan is strategically located at the crossroads of Asia, Africa, and Europe. The capital, Amman, is Jordan’s most populous city as well as the country’s economic, political, and cultural center.

What is now Jordan has been inhabited by humans since the Paleolithic period. Three stable kingdoms emerged there at the end of the Bronze Age: Ammon, Moab, and Edom. Later rulers include the Nabataean Kingdom, the Roman Empire, and the Ottoman Empire. After the Great Arab Revolt against the Ottomans in 1916 during World War I, the Ottoman Empire was partitioned by Britain and France. The Emirate of Transjordan was established in 1921 by then Emir Abdullah I and became a British protectorate. In 1946, Jordan became an independent state officially known as The Hashemite Kingdom of Transjordan. Jordan captured the West Bank during the 1948 Arab–Israeli War and the name of the state was changed to The Hashemite Kingdom of Jordan in 1949. Jordan is a founding member of the Arab League and the Organisation of Islamic Cooperation, and is one of two Arab states to have signed a peace treaty with Israel. The country is a constitutional monarchy, but the king holds wide executive and legislative powers.

Jordan is a relatively small, semi-arid, almost landlocked country with a population numbering at 9.5 million. Sunni Islam, practiced by around 92% of the population, is the dominant religion and coexists with an indigenous Christian minority. Jordan is considered among the safest Arab countries in the Middle East and has avoided long-term terrorism and instability. In the midst of surrounding turmoil, it has been greatly hospitable, accepting refugees from almost all surrounding conflicts as early as 1948, with an estimated 2.1 million Palestinians and 1.4 million Syrian refugees residing in the country. The kingdom is also a refuge to thousands of Iraqi Christians fleeing the Islamic State. While Jordan continues to accept refugees, the recent large influx from Syria placed substantial strain on national resources and infrastructure.

Jordan is classified as a country of “high human development” with an “upper middle income” economy. The Jordanian economy, one of the smallest in the region, is attractive to foreign investors because of its skilled workforce. The country is a major tourist destination, and attracts medical tourism to its well-developed health sector. Nonetheless, a lack of natural resources, large flow of refugees, and regional turmoil have crippled economic growth.

Politics of Jordan

Jordan is a constitutional monarchy, but the King holds wide executive and legislative powers. He serves as head of state and commander-in-chief and appoints the prime minister and heads of security directorates. The prime minister is free to choose his own cabinet and regional governors. However, the king may dissolve parliament and dismiss the government.

The Parliament of Jordan consists of two chambers: the upper Senate and the lower House of Representatives. All 65 members of the Senate are directly appointed by the king, they are usually veteran politicians or held previous positions in the House of Representatives or government. The 130 members of the House of Representatives are elected through proportional representation in 23 constituencies on nationwide party lists for a 4-year election cycle. Minimum quotas exist in the House of Representatives for women (15 seats, though they won 20 seats in the 2016 election), Christians (9 seats), and Circassians and Chechens (3 seats). Three constituencies are allocated for the Bedouins of the northern, central, and southern Badias. The king appoints and may dismiss all judges by decree, approves amendments to the constitution after passing by both parliaments, declares war, and acts as the supreme leader of the armed forces. Cabinet decisions, court judgments, and the national currency are issued in his name. The Cabinet, led by a prime minister, was formerly appointed by the king, but following the 2011 Jordanian protests, King Abdullah agreed to an elected cabinet. The cabinet is responsible to the Chamber of Deputies on matters of general policy; a two-thirds vote of “no confidence” by the Chamber can force the cabinet to resign.

King Hussein ruled Jordan from 1953 to 1999, surviving a number of challenges to his rule, drawing on the loyalty of his military, and serving as a symbol of unity and stability for both the Jordanians and Palestinian communities in Jordan. King Hussein ended martial law in 1989 and ended suspension on political parties that was initiated following the loss of the West Bank to Israel and to preserve the status quo in Jordan. In 1989 and 1993, Jordan held free and fair parliamentary elections. Controversial changes in the election law led Islamist parties to boycott the 1997, 2011, and 2013 elections.

King Abdullah II succeeded his father Hussein following the latter’s death in February 1999. Abdullah moved quickly to reaffirm Jordan’s peace treaty with Israel and its relations with the United States. During his first year in power, he refocused the government’s agenda on economic reform.

Jordan’s continuing structural economic difficulties, burgeoning population, and open political environment led to the emergence of various political parties. Moving toward greater independence, Jordan’s parliament has investigated corruption charges against several regime figures and become the major forum in which differing political views, including those of political Islamists, are expressed.

On February 1, 2012, it was announced that King Abdullah had dismissed his government. This has been interpreted as a pre-emptive move in the context of the Tunisian Jasmine Revolution and unfolding events in nearby Egypt.

King Abdullah of Jordan: The current King of Jordan is Abdullah II, who assumed the throne in 1999.

Foreign Relations

The kingdom has followed a pro-Western foreign policy and maintained close relations with the United States and the United Kingdom. During the first Gulf War (1990), these relations were damaged by Jordan’s neutrality and its maintenance of relations with Iraq. Later, Jordan restored its relations with Western countries through its participation in the enforcement of UN sanctions against Iraq and in the Southwest Asia peace process. After King Hussein’s death in 1999, relations between Jordan and the Persian Gulf countries greatly improved.

Jordan is a key ally of the U.S. and UK and together with Egypt, is one of only two Arab nations to have signed peace treaties with Israel, Jordan’s direct neighbor. Jordan supports Palestinian statehood through the two-state solution. The ruling Hashemite family has had custodianship over holy sites in Jerusalem since the beginning of the 20th century, a position reinforced in the Israel-Jordan peace treaty. Turmoil in Jerusalem’s Al-Aqsa mosque between Israelis and Palestinians created tensions between Jordan and Israel concerning the former’s role in protecting the Muslim and Christian sites in Jerusalem.

Jordan is a founding member of the Organisation of Islamic Cooperation and of the Arab League.

The Emirates of the Arabian Peninsula

The emirates of the Middle East (the United Arab Emirates, Qatar, and Kuwait) are monarchies ruled by emirs and represent some of the wealthiest Arab nations.

Learning Objectives

Compare and contrast the emirates of the Arabian Peninsula

Key Takeaways

Key Points

Most emirates have either disappeared, been integrated in a larger modern state or changed their rulers’ styles. True emirate-states have become rare, with only three in existence today.

The United Arab Emirates is a federal state that comprises seven federal emirates, each administered by a hereditary emir. These form the electoral college for the federation ‘s President and Prime Minister.

The UAE is criticized for its human rights record, including the specific interpretations of Sharia law used in its legal system that make flogging and stoning legal punishments.

Qatar has the highest per capita income in the world, backed by the world’s third largest natural gas reserves and oil reserves.

Kuwait is among the Middle East’s freest countries in terms of civil liberties and political rights, and Kuwaiti women are among the most emancipated in the Middle East.

Unlike other Gulf states, Kuwait does not have Sharia courts.

Key Terms

Emirate: A political territory is ruled by a dynastic Islamic monarch-style emir. It also means principality.

Arab Spring: A revolutionary wave of both violent and non-violent demonstrations, protests, riots, coups, and civil wars in the Arab world that began on December 17, 2010, in Tunisia with the Tunisian Revolution, and spread through the Arab League and surrounding countries. Major insurgencies and civil wars in Iraq, Libya, Syria, and Yemen resulted, along with civil uprisings in Bahrain and Egypt; large street demonstrations in Algeria, Iran, Lebanon, Jordan, Kuwait, Morocco, Oman, and Sudan; and minor protests in Djibouti, Mauritania, the Palestinian territories, Saudi Arabia, Somalia, and the Western Sahara.

Sharia law: The religious law governing the members of the Islamic faith. It is derived from the religious precepts of Islam, particularly the Quran and the Hadith.

Apostasy: A person’s formal renunciation of a religion, also used in the broader context of embracing an opinion contrary to one’s previous beliefs.

United Arab Emirates

The United Arab Emirates, or the UAE, is a federal absolute monarchy in Western Asia at the southeast end of the Arabian Peninsula and bordering seas in the Gulf of Oman, occupying the Persian Gulf. It borders with Oman to the east and Saudi Arabia to the south, although the United Arab Emirates shares maritime borders with Qatar in the west and Iran in the north and sea borders with Iraq, Kuwait, and Bahrain. In 2013, the UAE’s population was 9.2 million, of which 1.4 million are Emirati citizens and 7.8 million are expatriates.

The country is a federation of seven emirates that was established on December 2nd, 1971. The constituent emirates are Abu Dhabi (which serves as the capital), Ajman, Dubai, Fujairah, Ras al-Khaimah, Sharjah, and Umm al-Quwain. Each emirate is governed by an absolute monarch; together, they jointly form the Federal Supreme Council. One of the monarchs is selected as the President of the United Arab Emirates. Although elected by the Supreme Council, the presidency and prime ministership are essentially hereditary. The emir of Abu Dhabi holds the presidency, and the emir of Dubai is prime minister.

Islam is the official religion of the UAE,and Arabic is the official language, although English and Indian dialects are widely spoken and are the languages of business and education, especially in Abu Dhabi and Dubai.

The UAE’s oil reserves are the seventh-largest in the world, while its natural gas reserves are the 17th-largest. Sheikh Zayed, ruler of Abu Dhabi and the first President of the UAE, oversaw the development of the Emirates and steered oil revenues into health care, education, and infrastructure. The UAE’s economy is the most diversified in the Gulf Cooperation Council, with its most populous city of Dubai an important global city and international aviation hub. Nevertheless, the country remains principally reliant on its export of petroleum and natural gas.

The UAE is criticized for its human rights record, including the specific interpretations of Sharia used in its legal system. Flogging and stoning have been legal punishments in the UAE, a requirement derived from Sharia law. Some domestic workers in the UAE are victims of Sharia judicial punishments such as flogging and stoning. The annual Freedom House report on Freedom in the World has listed the United Arab Emirates as “Not Free” every year since 1999, the first year for which records are available on their website. UAE has escaped the Arab Spring; however, more than 100 Emirati activists were jailed and tortured because they sought reforms. Since 2011, the UAE government has increasingly carried out forced disappearances. Many foreign nationals and Emirati citizens have been arrested and abducted by the state.

Burj Khalifa: Burj Khalifa, a skyscraper in Dubai, is the tallest human-made structure in the world.

Qatar

Qatar is a sovereign country located in Western Asia, occupying the small Qatar Peninsula on the northeastern coast of the Arabian Peninsula. Its sole land border is with Saudi Arabia to the south, with the rest of its territory surrounded by the Persian Gulf. A strait in the Persian Gulf separates Qatar from the nearby island country of Bahrain, and maritime borders are shared with the United Arab Emirates and Iran.

Following Ottoman rule, Qatar became a British protectorate in the early 20th century until gaining independence in 1971. Qatar has been ruled by the House of Thani since the early 19th century. Sheikh Jassim bin Mohammed Al Thani was the founder of the State of Qatar. Qatar is a hereditary monarchy and its head of state is Emir Sheikh Tamim bin Hamad Al Thani. Whether it should be regarded as a constitutional or an absolute monarchy is a matter of opinion. In 2003, the constitution was overwhelmingly approved in a referendum, with almost 98% in favor. In 2013, Qatar’s total population was 1.8 million, with 278,000 Qatari citizens and 1.5 million expatriates.

Qatar is a high-income economy and a developed country, backed by the world’s third largest natural gas reserves and oil reserves. The country has the highest per capita income in the world. Qatar is classified by the UN as a country of very high human development and is the most advanced Arab state for human development. Qatar is a significant power in the Arab world, supporting several rebel groups during the Arab Spring both financially and through its globally expanding media group, Al Jazeera Media Network. For its size, Qatar wields disproportionate influence in the world, and has been identified as a middle power.

Sharia law is the main source of Qatari legislation according to Qatar’s Constitution. In practice, Qatar’s legal system is a mixture of civil law and Sharia law. Sharia law is applied to laws pertaining to family law, inheritance, and several criminal acts (including adultery, robbery and murder). In some cases in Sharia-based family courts, a female’s testimony is worth half a man’s. Codified family law was introduced in 2006. Islamic polygamy is allowed in the country. Stoning is a legal punishment in Qatar, while apostasy is a crime punishable by the death penalty. Blasphemy is punishable by up to seven years in prison and proselytizing can be punished by up to 10 years in prison. Homosexuality is punishable by the death penalty.

Emirate of Qatar: Former Emir Hamad bin Khalifa Al Thani and U.S. Secretary of State John Kerry in 2013.

Kuwait

Kuwait is a country in Western Asia. Situated in the northern edge of Eastern Arabia at the tip of the Persian Gulf, it shares borders with Iraq and Saudi Arabia. As of 2016, Kuwait has a population of 4.2 million people; 1.3 million are Kuwaitis and 2.9 million are expatriates (70% of the population).

Oil reserves were discovered in 1938. From 1946 to 1982, the country underwent large-scale modernization. In the 1980s, Kuwait experienced a period of geopolitical instability and an economic crisis following the stock market crash. In 1990, Kuwait was invaded by Iraq. The Iraqi occupation came to an end in 1991 after military intervention by coalition forces. At the end of the war, there were extensive efforts to revive the economy and rebuild national infrastructure.

Kuwait is a constitutional emirate with a semi-democratic political system. It has a high-income economy backed by the world’s sixth largest oil reserves. The Kuwaiti dinar is the highest-valued currency in the world. According to the World Bank, the country has the fourth-highest per capita income in the world.

The Constitution of Kuwait was promulgated in 1962. Kuwait is among the Middle East’s freest countries in terms of civil liberties and political rights. Kuwait ranks highly in regional metrics of gender equality, with the region’s highest Global Gender Gap ranking. The court system in Kuwait is secular; unlike other Gulf states, Kuwait does not have Sharia courts.

OPEC

OPEC, whose members are largely from the Middle East, is an oil cartel created in 1960 to counterbalance the political and economic power of the mostly U.S.-based multinational oil companies known as the “Seven Sisters.”

Learning Objectives

Explain what OPEC is and why it exists

Key Takeaways

Key Points

Organization of the Petroleum Exporting Countries (OPEC) is an oil cartel, mostly made up of Middle Eastern nations, that aims “to coordinate and unify the petroleum policies of its member countries and ensure the stabilization of oil markets.”

It was created in 1960, a year after the “Seven Sisters” multinational oil companies unilaterally reduced their posted prices for Venezuelan and Middle Eastern crude oil by 10 percent.

The 1973 oil crisis began in October of that year when the members of the Arab sub-group of OPEC proclaimed an oil embargo against the United States and other industrialized nations that supported Israel in the Yom Kippur War.

By the end of the embargo in March 1974, the price of oil had risen from US $3 per barrel to nearly $12 globally.

The embargo caused an oil crisis, with many short- and long-term effects on global politics and economics.

The 1979 (or second) oil crisis or oil shock occurred in the United States due to decreased oil output in the wake of the Iranian Revolution.

Key Terms

Iranian Revolution: The overthrow of the Pahlavi dynasty under Mohammad Reza Shah Pahlavi, who was supported by the United States, and its eventual replacement with an Islamic republic under the Grand Ayatollah Ruhollah Khomeini, the leader of the revolution. This was supported by various leftist and Islamist organizations and Iranian student movements.

cartel: An agreement between competing firms to control prices or exclude entry of a new competitor in a market. It is a formal organization of sellers or buyers that agree to fix selling prices, purchase prices, or reduce production using a variety of tactics.

Yom Kippur War: A war fought by a coalition of Arab states led by Egypt and Syria against Israel from October 6 to 25, 1973. The fighting mostly took place in the Sinai and the Golan Heights, territories occupied by Israel since the Six-Day War of 1967.

Organization of the Petroleum Exporting Countries (OPEC) is an intergovernmental organization of 13 nations, founded in 1960 in Baghdad by the first five members (Iran, Iraq, Kuwait, Saudi Arabia, Venezuela), and headquartered since 1965 in Vienna. As of 2015, the 13 countries accounted for an estimated 42 percent of global oil production and 73 percent of the world’s “proven” oil reserves, giving OPEC a major influence on global oil prices that were previously determined by American-dominated multinational oil companies.

OPEC’s stated mission is “to coordinate and unify the petroleum policies of its member countries and ensure the stabilization of oil markets, in order to secure an efficient, economic, and regular supply of petroleum to consumers, a steady income to producers, and a fair return on capital for those investing in the petroleum industry.” The organization is also a significant provider of information about the international oil market. As of December 2016, OPEC’s members are Algeria, Angola, Ecuador, Gabon, Iran, Iraq, Kuwait, Libya, Nigeria, Qatar, Saudi Arabia (the de facto leader), United Arab Emirates, and Venezuela. Two-thirds of OPEC’s oil production and reserves are in its six Middle Eastern countries that surround the oil-rich Persian Gulf.

The formation of OPEC marked a turning point toward national sovereignty over natural resources, and OPEC decisions have come to play a prominent role in the global oil market and international relations. The effect is particularly strong when wars or civil disorders lead to extended interruptions in supply. In the 1970s, restrictions in oil production led to a dramatic rise in oil prices and OPEC’s revenue and wealth, with long-lasting and far-reaching consequences for the global economy. In the 1980s, OPEC started setting production targets for its member nations; when the production targets are reduced, oil prices increase, most recently from the organization’s 2008 and 2016 decisions to trim oversupply.

Economists often cite OPEC as a textbook example of a cartel that cooperates to reduce market competition, but whose consultations are protected by the doctrine of sovereign immunity under international law. In December 2014, “OPEC and the oil men” ranked as #3 on Lloyd’s list of “the top 100 most influential people in the shipping industry.” However, their influence on international trade is periodically challenged by the expansion of non-OPEC energy sources, and by the recurring temptation for individual OPEC countries to exceed production ceilings and pursue conflicting self-interests.

History

In 1949, Venezuela and Iran took the earliest steps in the direction of OPEC by inviting Iraq, Kuwait, and Saudi Arabia to improve communication among petroleum-exporting nations as the world recovered from World War II. At the time, some of the world’s largest oil fields were just entering production in the Middle East. The United States had established the Interstate Oil Compact Commission to join the Texas Railroad Commission in limiting overproduction. The US was simultaneously the world’s largest producer and consumer of oil, and the world market was dominated by a group of multinational companies known as the “Seven Sisters,” five of which were headquartered in the U.S. Oil-exporting countries were motivated to form OPEC as a counterweight to this concentration of political and economic power.

In February 1959, the multinational oil companies (MOCs) unilaterally reduced their posted prices for Venezuelan and Middle Eastern crude oil by 10 percent. In September 1960, the Baghdad Conference was held at the initiative of Tariki, Pérez Alfonzo, and Iraqi prime minister Abd al-Karim Qasim. Government representatives from Iran, Iraq, Kuwait, Saudi Arabia, and Venezuela met in Baghdad to discuss ways to increase the price of crude oil produced by their countries and respond to unilateral actions by the MOCs. Despite strong U.S. opposition, according to historian Nathan Citiano, “[t]ogether with Arab and non-Arab producers, Saudi Arabia formed the Organization of Petroleum Export Countries (OPEC) to secure the best price available from the major oil corporations.”

In October 1973, the Organization of Arab Petroleum Exporting Countries (OAPEC, consisting of the Arab majority of OPEC plus Egypt and Syria) declared significant production cuts and an oil embargo against the United States and other industrialized nations that supported Israel in the Yom Kippur War, an event known as the 1973 oil crisis. A previous embargo attempt was largely ineffective in response to the Six-Day War in 1967. However, in 1973, the result was a sharp rise in oil prices and OPEC revenues, from US$3/barrel to US$12/barrel, and an emergency period of energy rationing, intensified by panic reactions, declining U.S. oil production, currency devaluations, and a lengthy UK coal-miners dispute.

For a time, the UK imposed an emergency three-day workweek. Seven European nations banned non-essential Sunday driving. U.S. gas stations limited the amount of gasoline that could be dispensed, closed on Sundays, and restricted the days when gasoline could be purchased based on license plate numbers. Even after the embargo ended in March 1974 following intense diplomatic activity, prices continued to rise. The world experienced a global economic recession, with unemployment and inflation surging simultaneously, steep declines in stock and bond prices, major shifts in trade balances and petrodollar flows, and a dramatic end to the post-WWII economic boom.

1973 Oil Crisis: An undersupplied U.S. gasoline station, closed during the oil embargo in 1973

The 1973–1974 oil embargo had lasting effects on the United States and other industrialized nations, which established the International Energy Agency in response. Oil conservation efforts included lower speed limits on highways, smaller and more energy-efficient cars and appliances, year-round daylight saving time, reduced usage of heating and air-conditioning, better insulation, increased support of mass transit, national emergency stockpiles, and greater emphasis on coal, natural gas, ethanol, nuclear, and other alternative energy sources. These long-term efforts became effective enough that U.S. oil consumption would rise only 11 percent during 1980–2014, while real GDP rose 150 percent. But in the 1970s, OPEC nations demonstrated convincingly that their oil could be used as both a political and economic weapon against other nations, at least in the short term.

The 1979 oil crisis occurred in the United States due to decreased oil output in the wake of the Iranian Revolution. Despite the fact that global oil supply decreased by only ~4%, widespread panic resulted, driving the price far higher than justified by supply. The price of crude oil more than doubled to $39.50 per barrel over the next 12 months, and long lines once again appeared at gas stations as they had in the 1973 oil crisis.

In 1980, following the outbreak of the Iran–Iraq War, oil production in Iran nearly stopped, and Iraq’s oil production was severely cut as well. Economic recessions were triggered in the U.S. and other countries. Oil prices did not subside to pre-crisis levels until the mid-1980s.

After 1980, oil prices began a 20-year decline, eventually reaching 60 percent fall-off during the 1990s. As with the 1973 crisis, global politics and power balance were impacted. Oil exporters such as Mexico, Nigeria, and Venezuela expanded production; the USSR became the top world producer; North Sea and Alaskan oil flooded the market; and OPEC lost influence.